> When you move money domestically, your bank and the recipient’s bank use some intermediary system to coordinate a series of agreements which result in your bank agreeing it owes you less than it did prior and the recipient’s bank agreeing that it owes the recipient more than it did previously.
I just don't understand the reason to leave out central bank in these discussions. Yes there's all those agreements, payment rails and so on. However if you look past all that inter-bank transfer results in banks' central-bank reserves getting changed. Let me elaborate.
Banks Foo and Bar have accounts with central bank. When I Transfer USD 100 from my account at Foo to my friend's account at Bar the central bank does -100 to Foo's reserve balance and +100 to Bar's reserve balance. For more details please read this terrific, short and succinct book "Central Banking 101"[1]
International wires, however is a different matter. You have FX market, correspondence banking and what not. But when it comes to moving USD around the NY Fed has absolute and total control over clearance. Any bank that hold USD deposits must have corresponding reserve account with NY Fed. So regardless if SWIFT or any other form of wire transfer, NY Fed can cripple a bank's operations by freezing their reserves. Here's a relevant sanction announced by the US Treasury a week ago [2]. And here's the relevant section.
"Treasury is taking unprecedented action against Russia’s two largest financial institutions, Public Joint Stock Company Sberbank of Russia (Sberbank)and VTB Bank Public Joint Stock Company (VTB Bank), drastically altering their fundamental ability to operate. On a daily basis, Russian financial institutions conduct about $46 billion worth of foreign exchange transactions globally, 80 percent of which are in U.S. dollars. The vast majority of those transactions will now be disrupted. By cutting off Russia’s two largest banks — which combined make up more than half of the total banking system in Russia by asset value — from processing payments through the U.S. financial system. The Russian financial institutions subject to today’s action can no longer benefit from the remarkable reach, efficiency, and security of the U.S. financial system."
Of course they could continue to transfer money through correspondence banks etc., however their existing USD reserves are frozen.
[1] https://www.goodreads.com/en/book/show/56863052-central-bank...
[2] https://home.treasury.gov/news/press-releases/jy0608